Remy Cointreau Earnings Top Estimates on China Cognac Sales

Nov. 29 (Bloomberg) -- Remy Cointreau SA, France’s second-biggest distiller, said first-half earnings increased 27 percent
and forecast a “substantial” gain for the year as the company
sells more cognac in markets such as China.

So-called current operating profit, or earnings before
interest and taxes excluding some items, rose to 106.2 million
euros ($142 million) in the six months ended Sept. 30, Paris-based Remy said today. That exceeded the 101 million-euro
average estimate of seven analysts surveyed by Bloomberg News.

Remy rose 2.9 percent to 61.90 euros in Paris trading.
Earnings growth was led by Remy Martin cognac, which the company
said benefited from a “thriving” Asian economy. Liquor makers
are looking to emerging markets including China to drive growth
as economic turmoil in Europe restrains sales.

“Remy continues to report sector-leading earnings
growth,” Nik Oliver, an analyst at Bank of America Merrill
Lynch, wrote in a note. The brokerage has an “underperform”
recommendation on the stock, citing a “full” valuation of 18
times estimated earnings, more than spirits and luxury peers.

The company said its performance remained strong in Europe,
particularly in France, Germany and Russia. Remy wrote down the
Metaxa brand by 45 million euros last year due to slumping sales
in Greece as government austerity measures stint spending.

Remy Martin

Remy Martin cognac’s operating profit increased 34 percent
to 91.2 million euros, the company said. Better qualities of the
brand led growth in China, it said.

Market concern about a slowdown in the high-end consumer
segment in China “have recently reduced, but this remains the
key risk for Remy,” which earns about 40 percent of profit in
the country, analysts Jamie Isenwater and Jonathan Fell at
Deutsche Bank AG in London wrote in a note before the results.
“Remy remains unaffected at present.”

Remy’s first-half operating margin, a measure of
profitability, widened to 22.4 percent from 19.5 percent as the
company focused more on the premium end of the market.

Pernod-Ricard SA, the maker of Absolut vodka, said last
month it aims for 6 percent growth in “organic” earnings from
recurring operations this year, after emerging-market sales
boosted revenue in its first quarter. Diageo Plc, the world’s
biggest distiller, said in August it would target organic sales
growth of 6 percent in the “medium term” and improve margins.